All Florida retailers need to be aware of their legal duty to collect state and local sales tax. The State of Florida imposes a general sales tax rate of six-percent. Individual counties within the state may assess their own discretionary sales surtax. These surtax rates vary between 0.5 percent and 1.5 percent, depending on the county.
If you deliver products to a customer, that can affect the assessment of the local surtax. Even if your physical store is located in a county that does not assess a surtax, if you deliver a tangible good to a customer in another county that does assess a surtax, you must collect that tax as part of your general sales tax obligation. Similarly, if your customer resides in a county that charges a different surtax than the county where your business is located, you would still collect the surtax for the county where the customer resides.
Delivery of good also raises its own subset of sales tax issues. If you include the cost of delivery as part of a sale—that is, you do not separately state a delivery charge on your invoice—then you must collect the applicable sales tax on the full price charged to the customer. And even if you do state a separate delivery fee, you must still collect sales tax on that amount if the delivery is a required part of the sale. However, if the customer has the option to decline delivery and pick up a purchase themselves, you would not assess sales tax. The optional delivery is considered a non-taxable service under Florida law.
Here is what this means in practice. Let us say you run a small business that primarily sells goods over the Internet. You take orders online, and ship any purchases to customers. Since the customer cannot decline delivery—as you lack a physical store for the customer to physically pick up his or her purchase—you must assess sales tax on any delivery charges, whether or not you separately state such charges on your invoice. On the other hand, let us say you maintain a physical location, and customers have the choice of coming to your store to pick up their purchases. If the customer instead chooses to have you ship their purchase, you do not collect sales tax on any delivery charge, provided it is clearly identified as such on your invoice.
Taxation of delivery fees can be a confusing subject even for large retailers. The well-known national pizza chain Papa John’s is currently embroiled in litigation here in Florida over their allegedly illegal collection of sales taxes on their delivery fees. A group of plaintiffs filed a class action against Papa John’s, claiming its stores included an optional three-dollar delivery fee in calculating applicable Florida sales tax. Papa John’s argued Florida law was unclear on this issue, but in a July 23 decision denying the company’s motion to dismiss, a federal judge said just the contrary. As explained above, when a company offers the option of delivery and separately states a delivery fee, it is not subject to tax.
When it comes to sales tax questions, no Florida retailer should need to guess what the law does or does not require. An experienced Florida business attorney can help you navigate the myriad state and county rules on this subject and help you avoid unnecessary litigation. Contact Naples attorney John S. Sarrett today if you have any questions.